Home sales, prices continue to climb

“The residential real-estate market in the U.S. is on fire,” -- Brian Jones, senior U.S. economist at Societe Generale

As a sign of a recovering economy, the number of homes sold and the average prices both rose last month.Frances Micklow/The Star-Ledger

Sales of previously owned homes climbed more than forecast in May to the highest level since November 2009 and prices jumped, indicating more progress for residential real estate.

Purchases of existing houses increased 4.2 percent to an annualized rate of 5.18 million from 4.97 million in April, the National Association of Realtors figures showed today in Washington. The median forecast in a Bloomberg survey called for a 5 million rate of sales. The median selling price surged from a year ago by the most since October 2005, the group said.

Rising home values and mortgage rates within a percentage point of all-time lows will help encourage Americans to put their properties on the market and trade up. The increase in wealth from housing is also bolstering confidence and sustaining consumer spending that will keep fueling the economy.

“The residential real-estate market in the U.S. is on fire,” said Brian Jones, senior U.S. economist in New York at Societe Generale, who projected a 5.17 million annual rate for home sales. “Ultimately, I think it’s a sign of confidence in the U.S. economy.”

Purchases rose in all four regions, led by an 8 percent in Midwest and a 4 percent gain in the South.

The median price of an existing home increased 15.4 percent from a year earlier to $208,000 last month, the highest since July 2008. The monthly gain was the biggest since October 2005, when the median surged a record 16.6 percent.

Today’s report also showed that foreclosures and other distressed sales accounted for 18 percent of the total, matching the lowest since October 2008. First-time buyers accounted for 28 percent of purchases last month. They typically represent 40 percent to 45 percent of the market, according to the Realtors group.

Investors made up 18 percent, while all-cash transactions were 33 percent.

“The housing market is too good,” Lawrence Yun, chief economist at the Realtors group, said at a news conference as the figures were released. “It is breaking out again. It is being accompanied by an increase in home values. We do need to see a moderation of home-price growth and that can only come from new supply.”

Housing starts need to increase to a 1.5 million annualized rate to help temper home-price gains, Yun said.

There were 2.22 million existing homes on the market in May, up from 2.15 million a month earlier, today’s figures showed. The supply fell to 5.1 months’ worth in May from 5.2 months. Listed inventory is 10.1 percent below a year ago.

For some builders such as Fort Worth, Texas-based D.R. Horton Inc., the lack of housing inventory has given them room to increase prices.

“For the very first time in many, many, many years, we have pricing power and a lot of that just deals with the lack of lots that are available in the marketplace for a lot of builders,” Donald J. Tomnitz, chief executive officer, said in a June 12 presentation. “The new home inventory, as you know, the number of months’ supply has decreased dramatically. And so we’re in a powerful position to continue to increase prices as we move forward.”

Sales of newly built houses picked up to a 460,000 annualized rate in May, the highest since July 2008, according to the median forecast in a Bloomberg survey of economists before a June 25 Commerce Department report. Housing starts climbed to a 914,000 pace, a Commerce Department report this week showed.

Existing-home sales are recovering after reaching a 13-year low of 4.11 million in 2008. The market peaked at a record 7.08 million in 2005.

The improvement in housing has rippled through the economy to give a boost to home-improvement product makers including Masco Corp., builders, real estate brokers and mortgage lenders.

“Housing dynamics are improving,” Timothy Wadhams, chief executive officer of Masco, said in a May 22 presentation. The Taylor, Michigan-based company manufactures and sells home- improvement and building products such as cabinetry. “Demand is picking up, inventories are very, very low. So we ought to see a nice lift there.”

Record monetary stimulus by the Fed has helped hold down mortgage rates. The average fixed rate on a 30-year loan was 3.98 percent in the week ended June 13, up from an all-time low of 3.31 percent in November, according to data from McLean, Virginia-based Freddie Mac.

They risk rising further after Fed Chairman Ben S. Bernanke yesterday said the central bank may end bond purchases in the middle of 2014 if the economy keeps improving.

“If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the pace of purchases later this year,” Bernanke said. “If the subsequent data remain broadly aligned with our current expectations for the economy, we will continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around mid-year.”

Bernanke spoke after the Federal Open Market Committee said it would maintain the $85 billion pace of monthly asset purchases and that it sees the “downside risks to the outlook for the economy and the labor market as having diminished since the fall.”

“Interest rates have risen, but they’re still at historic lows,” Robert Niblock, chief executive officer of Lowe’s Cos., the second-largest U.S. home improvement retailer, said earlier this week in an interview. The Mooresville, North Carolina-based company’s sales in the second quarter have recovered from March and April when rainy, colder-than-normal weather limited demand, he said.Bloomberg